This article explores the key changes introduced by IFSCA through this circular and examines their implications for fund management activities within the IFSC.

Green channel extension

When schemes are under a green channel, the schemes filed can be open for subscription by investors immediately upon filing with the Authority. This does away with the requirement to file the placement memorandum before 21 working days of the scheme’s launch. During this period, the Authority may endeavour to share its comments, which the fund management entity (FME) has to incorporate in the placement memorandum.

Prior to the issuance of the circular, the filing of scheme documents was possible under the green channel route only in the following scenarios:

• Venture capital schemes launched by FMEs through private placement.[2] These invest primarily in unlisted securities of start-ups, emerging or early-stage venture capital undertakings mainly involved in new products or services, technology or IPR-based activities, etc.[3]
• Restricted schemes (non-retail) soliciting money only from accredited investors.[4] The other restricted schemes were not eligible under the green channel route.

However, the circular provides that all the schemes or funds under Chapter III, excluding retail schemes (under Part C), may be launched after filing the private placement memorandum (PPM) along with other documents ensuring minimum disclosures and other requirements specified in the circular. This includes venture capital schemes under Part A, restricted schemes (non-retail) under Part B, and special situation funds under Part D. While venture capital schemes were already under the green channel, the IFSCA has extended it to special situation funds and all restricted schemes (non-retail), i.e., not just those soliciting money from accredited investors.

Other key aspects

• The PPM of the scheme or fund has to contain certain minimum disclosures covering investment objectives, NAV determination, legal, regulatory and tax considerations, and so on. Notably, a disclaimer on the cover page should specify that the filing of the PPM is for the purpose of record and is not to be construed as cleared or approved by the Authority.
• The application form in Annex A and documents in Annex B are to be submitted. This format of application replaces the one specified in February of last year.[5] Once the application is received, a letter of acknowledgement will be issued.
• The validity of the PPM may be extended beyond six months by refiling the documents and paying the applicable fee.
• Scheme filing fee to be remitted in US Dollars.
• A web portal would soon be set up for filing of scheme documents before an offer is made.
• Apart from the circular from February 2023 referred to earlier, the circular mandating FMEs to seek authorisation for each scheme filed under Chapters III, IV, and V of the Regulations, has also been subsumed.[6]

Conclusion

With this circular, IFSCA has sought to strike a balance by extending the green channel route to all restricted schemes (non-retail) and special situation funds, and at the same time ensuring that a disclaimer is placed on the placement memorandum’s cover page to dispel any notion that it has been approved by the Authority. Moreover, the declaration-cum-undertaking that is part of the application form requires the authorised representative of the FME to confirm that the FME will at all times comply with the Fund Management Regulations and the subsidiary directions issued thereunder.